RD Relief
R&D Tax Credits - Scientific or Technological Advance
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- R&D Tax Advisors are invited to find out more about the Inspired.tax claim preparation software.
- Otherwise, please feel free to continue to browse this website for useful information regarding claiming R&D Tax Credits in the UK. However, beware that none of the information has been updated since 2018.
Contents
Background
Many individuals in many companies and industries have preconceptions and thoughts about what the term 'Technological Advance' (or 'Scientific Advance') means.
Unfortunately, this can be unhelpful for R&D Tax Credit claims, as HMRC have a specific definition which precisely defines the types of project that qualify.
We will take a look at the precise HMRC guidelines and analyse what this means below.
Unfortunately, this can be unhelpful for R&D Tax Credit claims, as HMRC have a specific definition which precisely defines the types of project that qualify.
We will take a look at the precise HMRC guidelines and analyse what this means below.
Breakdown of the BEIS Guidelines for the Technological Advance
"An advance in science or technology means an advance in overall knowledge or capability in a field of science or technology (not a company's state of knowledge or capability alone). The advance includes the adaptation of knowledge or capability from another field of science or technology to make such an advance where this adaptation was not readily deducible."
"An advance in science or technology may have tangible consequences (such as a new or more efficient cleaning product, or a process which generates less waste) or more intangible outcomes (new knowledge or cost improvements, for example). "
"A process, material, device, product, service or source of knowledge does not become an advance in science or technology simply because science or technology is used in its creation. Work which uses science or technology but which does not advance scientific or technological capability as a whole is not an advance in science or technology."
"A project which seeks to, for example, (a) extend overall knowledge or capability in a field of science or technology; or (b) create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology; or (c) make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes; or (d) use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (e.g. a product which has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner)
will, therefore, be R&D. "
will, therefore, be R&D. "
"Even if the advance in science or technology sought by a project is not achieved or not fully realised, R&D still takes place.
"If a particular advance in science or technology has already been made or attempted, but details are not readily available (for example, if it is a trade secret), work to achieve such an advance can still be an advance in science or technology."
"However, the routine analysis, copying or adaptation of an existing product, process, service or material, will not be an advance in science or technology."
Analysis
Hence an advance in science or technology occurs when a company seeks to develop something new at an industry level. It is not important whether or not another company has achieved something similar, as long as the company are seeking to realise the advanced in a fundamentally different way.
It is only the attempt to achieve a technological advance which is required, so if a project is cancelled, or does not continue for any reason, then the costs incurred can still qualify.
It is only the attempt to achieve a technological advance which is required, so if a project is cancelled, or does not continue for any reason, then the costs incurred can still qualify.
Examples of Eligible Projects
Main article: Examples of R&D in Different Industries
It could be that your competent professionals are developing headphones that have an alloy casing that is thinner than was previously possible owing to their compressive strength, or that you are developing a new algorithm for a software system that runs 10% faster than previous algorithms. The critical point for the advance is that it needs to involve moving forwards from the current baseline of technology (or science) at an industry level.
If companies (or research institutions) have achieved a similar advance to which you are seeking, but they have not released details into the public domain, or for whatever reason, you progressed without knowledge of what they did, then your project is still claimable for R&D Tax Credits.
Non-Qualifying Examples
Deploying a known solution or configuring a technology according to known principles would not qualify. For example, in software development, if a company takes an ERP system (such as SAP) and configures it according to it is known technological parameters, but adhering to the business rules of the company, would not typically qualify as a technological advance. However, if the company is extending the system (perhaps with newly integrated web-apps, or a software wrapper around the technology) or developing new levels of integration, then this could qualify for R&D Tax Credits.
Likewise, the development of user interfaces for a software system would be considered to be a design Advance, but not a Technological Advance, as it would not be developing new or improving existing technology.